Indian banks have launched a broad-based increase in Foreign Currency Non-Resident (FCNR) deposit rates, with some lenders offering returns of more than 7% on US dollar deposits as they compete to attract NRI funds following the Reserve Bank of India's recent relaxation of interest rate norms.

Private sector lenders and small banks have sharply revised their FCNR deposit rates after the RBI temporarily removed the interest rate ceiling on fresh FCNR(B) deposits with maturities between three and five years and eased restrictions on Non-Resident External (NRE) deposits with tenures of three years and above.

The relaxations, effective from June 17 to September 30, 2026, are aimed at attracting foreign currency inflows, improving domestic liquidity and supporting the rupee.

Bandhan Bank, CSB Bank offer over 7%

Bandhan Bank currently offers the highest FCNR rate among major lenders, providing 7.1% interest on US dollar deposits of $1 million and above for tenures of three to five years. Deposits below $1 million earn 7%.

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CSB Bank has also significantly raised rates, offering 6.95% for deposits with maturities of three to four years, 7% for four to five years and 7.05% on five-year deposits. The move represents an increase of nearly 300 basis points from earlier levels.

YES Bank offers up to 6.6%, while South Indian Bank provides 6.5% on three-to-five-year dollar deposits.

Kotak Mahindra Bank offers up to 6.15% for deposits exceeding $1 million and 6% for smaller deposits. ICICI Bank and Axis Bank have also revised their rates to 6% across the three-to-five-year maturity segment. Bank of Baroda offers up to 6% on five-year deposits.

RBI easing fuels competition

The recent repricing follows the RBI's announcement of a concessional USD-rupee swap facility on fresh FCNR(B) deposits until September 30, 2026. The central bank has also temporarily withdrawn the interest rate ceiling on fresh NRE deposits with tenures of three years and above.

An NRE account allows overseas Indians to park foreign earnings in India in rupee terms while retaining the ability to repatriate both principal and interest freely.

The RBI move is expected to encourage fresh inflows at a time when FCNR(B) deposits have witnessed a sharp slowdown.

According to RBI data, net inflows under FCNR(B) accounts plunged to $900 million in FY26 from $7.1 billion in FY25, marking an 87% decline. Outstanding balances under the FCNR(B) scheme stood at $946 million during FY26.

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Analysts see sizeable inflows

Global brokerage Goldman Sachs estimates that the latest RBI measures could bring in $30-50 billion of inflows during calendar year 2026, with most of the money expected to arrive between July and September.

The RBI's latest measures have revived memories of the 2013 FCNR(B) scheme, under which Indian banks mobilised nearly $25 billion from overseas Indians.

Analysts estimate that the current initiative could attract $30-50 billion of inflows during calendar year 2026, although participation may be lower than in 2013 due to higher global interest rates. Nevertheless, banks are betting that attractive returns and currency-risk protection will encourage NRIs to park more funds in India.

FCNR deposits allow NRIs to maintain fixed deposits in foreign currencies such as the US dollar, pound sterling, euro, Canadian dollar and Australian dollar, enabling them to earn returns without taking direct exposure to rupee fluctuations.

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Published on: Jun 22, 2026 6:25 AM IST